What is a personal loan?

What is a personal loan?

A personal loan is generally associated with an unsecured loan. It is a great way to get cash when needed for an emergency, home improvements or leisure activities like weddings and holidays.

Personal loans can range between R1,000 and R200,000 with a maximum repayment period of 72 months. Once you have applied and received a loan, you will need to pay back the personal loan in monthly instalments over your chosen period.

Before you select a personal loan, you should make sure you have a good understanding of how much money you need and over what period. This will influence the interest rates charged and the terms in which the lender lends you the money.

the good thing about personal loan is that it does not mater what you want to do with it

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Monthly repayments on all loans are calculated at a 27.5% interest rate plus a service fee of R69.00. This calculator is for illustration purposes only.

1. Improve Your Credit Score

Your credit score plays a large part in determining how likely you are to pay your Personal Loan back to the provider. Kristia van Heerden, CEO of Just One Lap, says that to achieve a shiny credit score, it really helps to have a little credit that you settle on time every month. But isn’t it counter-intuitive that a healthy credit score is built up by having debt? Not really, says Kristia. “Banks and other credit providers want to see that you can be trusted to pay back your debt on time and in full”. One way of doing this is to have an in-store credit card that you settle with a retailer every month.

Jessica White, from Citadel Wealth Management, advises that improving your credit score is not a quick fix and takes time. “Your goal should be to create long-term healthy credit habits as opposed to quick fixes with the view to securing a loan” says Jessica. Some other quick tips she says can improve your credit score:

  • Pay your bills on time: This is the biggest contributor to your credit score as delinquent payments and collections can have a very negative impact.
  • Savings accounts don’t build a credit record: If you only have a savings account for your monthly transactions, consider opening a cheque or current account – as long as it’s appropriate for your situation.
  • Keep your debt burden light: A high outstanding debt bill will have a negative effect on your credit score.
  • Open new credit accounts only as needed: Don’t open accounts for the sole purpose of improving your credit score as it probably won’t improve your credit rating much.
  • Pay off debt: Rather than moving it around.
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